Mumbai, Oct 1 (PTI) The rupee recovered 15 paise from its all-time low to 88.65 against the US dollar on Wednesday, after the Reserve Bank Governor delivered a dovish pause, broadly in line with market expectations.

Reserve Bank of India expectedly left its key interest rates unchanged on Wednesday, as it waited for greater clarity on the impact of US tariffs as well as playout of earlier rate cuts and recent tax reductions.

RBI Governor Sanjay Malhotra, however, signalled scope for easing in the coming months to support the economy from any possible hit from US tariffs.

The six-member monetary policy committee voted unanimously to keep the repurchase rate unchanged at 5.5 per cent and decided to continue with a "neutral" policy stance, giving it flexibility to move in either direction if needed in future.

At the interbank foreign exchange, the rupee opened at 88.79 against the US dollar, then rose to 88.65, higher by 15 paise from its previous close.

On Tuesday, the rupee fell 5 paise to an all-time low of 88.80 against the US dollar.

Meanwhile, the Reserve Bank on Wednesday announced a slew of measures, including allowing banks to lend in Indian Rupees to non-residents from Bhutan, Nepal and Sri Lanka for bilateral trade to promote the use of domestic currency for cross-border settlements.

RBI Governor Sanjay Malhotra proposed to establish transparent reference rates for currencies of India’s major trading partners to facilitate INR-based transactions.

RBI has permitted wider use of Special Rupee Vostro Account (SRVA) balances by making them eligible for investment in corporate bonds and commercial papers.

SRVA is an account opened by a foreign bank with an Indian bank to facilitate international trade settlements directly in Indian Rupees (INR). These measures will help reduce dependence on the US dollar and thus shield the economy from sudden exchange rate fluctuations and currency crises.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 97.61, lower by 0.16 per cent.

Brent crude, the global oil benchmark, was trading 0.24 per cent higher at USD 66.19 per barrel in futures trade.

On the domestic equity market front, benchmark indices Sensex and Nifty extended early gains and were trading significantly higher on Wednesday, helped by buying in bank stocks.

Foreign Institutional Investors offloaded equities worth Rs 2,327.09 crore on Tuesday, according to exchange data.

Meanwhile, the Centre's fiscal deficit stood at 38.1 per cent of the full-year target at the end of August, according to data released by the Controller General of Accounts (CGA) on Tuesday.

The fiscal deficit was 27 per cent of the Budget Estimates (BE) of 2024-25 in the first five months of the previous financial year. PTI DRR DR DR

INR cross-border settlements expanded as banks may lend in rupees to neighbouring non-residents, promoting currency usage. The Reserve Bank held its key policy rate and neutral stance while announcing measures to expand INR international usage: banks may lend in Indian Rupees to non-residents of Bhutan, Nepal and Sri Lanka for bilateral trade; transparent reference rates for major trading-partner currencies will be proposed to support INR transactions; and Special Rupee Vostro Account balances may be invested in corporate bonds and commercial paper to deepen INR settlement and reduce dollar dependence.